Understanding Asset Bubble

Understanding Asset Bubble

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When an individual is seeking to expand his/her estate by increasing his/her assets, one concern that he/she must consider is the possibility of an asset bubble. An asset bubble, or an economic bubble, occurs when a commodity is in high demand, and as a result, the price of this asset becomes very inflated. As a result, consumers may find it difficult to attain this asset.

One example of an asset bubble was increased oil prices during the summer months of 2008. Gas prices soared to outrageous highs, making it difficult for consumers to afford filling their cars with gas. In some instances, an asset bubble can cause serious, widespread complications, such as the credit crisis that aggravated the economy and caused a national, and international, economic crisis.

The credit crisis is often thought to have been amplified by the high demand for real estate, which was initiated by very low interest rates. As seen throughout the economic crisis that began in 2008, an asset bubble can cause devastating effects, causing consumers to lose a large portion of their estates. Hundreds of thousands of people lost their jobs due to the state of the economy, and many individuals were unable to pay their debts, forcing them to file for bankruptcy and foreclose their homes.

During this period, people lost their motor vehicles, homes, monetary savings, and retirement funds. An economic bubble can destroy an individual's estate. An individual should prepare for the possibility of an asset bubble occurring as best as he/she is able, so that in the event that this does occur, he/she is able to maintain his/her estate.